Buyers', not investors', market

It’s not a secret that real estate developers are facing liquidity crunch owing to inventory pile up and sluggish housing sales. Furthermore, it’s not a secret too that it’s a buyers’ market and homebuyers have an upper hand in negotiations with builders.

However, investors and speculators, who are looking to make a quick buck may have to stay away from the market. This is likely to be good for these investors as well as prospective home-buyers as builders be compelled to lean more towards the latter.

Clearly, investors who are aiming to take advantage of the current market scenario and hunt a good bargain. But, their expectations of sharp returns may not be come true as any major uptrend in residential property prices is unlikely anytime soon.

While both speculators and investors are relatively different species, their objective is to make profit from an investment. A home-buyer, one the other hand, is buying property for end use and therefore his/her decision may not necessarily be driven by expectation of price appreciation.

With the onset of Real Estate Regulatory Act or RERA, the sector is expected to usher in improved transparency and control than the way it has been for years. Buying real estate is expected to be lot more safe as developers will find it difficult to divert money given that 70% of funds received will have to be maintained in an escrow account. Information flow will improve as the builder is expected to share the project’s approval status on RERA’s website. Several such measures will make it less risky for home-buyers.

Low levels of uncertainty or lower risk is associated with low potential returns and this would be good for home-buyers who have been struggling to buy their homes. However, investors and more specifically speculators may have to move over to other asset classes to satiate their appetite for higher returns that usually come along with higher risk.

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